The most evident use is adding animated effects to derivable meshes that do not have extra layers for animation (both "skin" ans "composite" materials can have their animation settings configured individually), and creating new kinds of "anyskin" products (which have something overlayed over eye textures, for example)

My previous research in the Skin Composite capabilities, from the old forum: http://www.imvu.com/catalog/modules.php ... w=previous (Back then,I did not know about specifying the "skin" material index, so I had to put the "skin" (neon) material in the slot 7 no matter what)